New York Law Review

Tag: Scheme or Business

  • People v. Barash, 41 N.Y.2d 20 (1976): Defining ‘Scheme or Business’ for Criminal Usury

    People v. Barash, 41 N.Y.2d 20 (1976)

    The terms “scheme or business of making or collecting usurious loans” in New York Penal Law § 190.42 are not unconstitutionally vague, and the statute applies to a series of interrelated usurious loan transactions by the same person constituting an integrated operation.

    Summary

    Barash was convicted of criminal usury for a series of loans he made to George Morgan. The New York Court of Appeals upheld the conviction, finding that the terms “scheme or business” in the criminal usury statute were not unconstitutionally vague. The Court determined that the evidence supported the jury’s finding that Barash engaged in a “scheme or business” of making usurious loans, due to the multiple, interrelated loans made to Morgan to benefit a club in which Barash had a financial interest. The Court also addressed a potential conflict of interest with Barash’s attorney, ultimately determining it did not warrant reversal.

    Facts

    Barash made four usurious loans to George Morgan over eight months. These loans were connected to the Italian-American Club’s operations, in which Barash had a financial interest. The loans carried extremely high interest rates (104% to 182% per annum). Morgan cooperated with law enforcement and testified against Barash.

    Procedural History

    Barash was indicted for first and second-degree criminal usury. The prosecution moved to disqualify Barash’s counsel due to a conflict of interest, which was denied. Barash was convicted on all counts. The Appellate Division affirmed the conviction, and the New York Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether the terms “scheme or business of making or collecting usurious loans” in Penal Law § 190.42 are unconstitutionally vague.
    2. Whether the evidence was sufficient to sustain Barash’s conviction for criminal usury in the first degree.
    3. Whether the trial court erred by not inquiring into a potential conflict of interest with Barash’s defense counsel.
    4. Whether the trial court erred in denying a motion for a mistrial after receiving a note from a juror indicating an inability to render a fair verdict.

    Holding

    1. No, because the terms have a readily understandable meaning derived from common usage and legal dictionaries.
    2. Yes, because the evidence showed a series of interrelated usurious loan transactions that constituted an integrated operation.
    3. Yes, but this error did not warrant reversal.
    4. No, because the note alone did not mandate a mistrial, and the defense did not request further inquiry.

    Court’s Reasoning

    The Court reasoned that “scheme” and “business” are commonly understood terms and not impermissibly vague. A “scheme” is “a design or plan formed to accomplish some purpose,” and “business” is “commercial activity engaged in for gain.” The Court emphasized the importance of context, stating that the statute applies to “a series of transactions, multiple as to loans if not borrowers, which are usurious and are made by the same person under such circumstances that they can factually be found to be interrelated and to constitute parts of an integrated single operation.”

    The Court found sufficient evidence to support the conviction, citing the four loans made to Morgan over a short period at usurious rates, all connected to the Italian-American Club’s financial stability. The jury was justified in concluding this constituted a “scheme or business.”

    Regarding the conflict of interest, the Court acknowledged that the trial court erred by not inquiring of Barash about the potential risks of his attorney’s prior representation of Morgan, the key prosecution witness. However, the Court held that Barash was not entitled to reversal because he failed to demonstrate that an actual conflict of interest, or even a significant possibility thereof, existed. The Court noted that Barash’s attorney reasonably believed he was no longer bound by confidentiality to Morgan due to Morgan’s cooperation with the prosecution, and his cross-examination of Morgan was diligent.

    Finally, the Court found no error in denying the mistrial. Defense counsel did not request further inquiry of the juror and only moved for a mistrial. The juror continued to deliberate and ultimately joined in the unanimous verdict.

  • People v. Ersan, 47 N.Y.2d 781 (1979): Defendant’s Right to Particulars Regarding “Scheme or Business” Allegation in Usury Case

    People v. Ersan, 47 N.Y.2d 781 (1979)

    In a criminal usury case where the indictment alleges a “scheme or business” of making usurious loans, the defendant is entitled to particulars regarding that allegation to adequately prepare a defense.

    Summary

    Defendant was indicted for first-degree criminal usury, which requires proof that the usurious conduct was part of a “scheme or business.” The defendant requested particulars regarding the “scheme or business” allegation, but his motion was denied. At trial, the prosecution failed to prove the first-degree charge, and the jury was instructed on the lesser included offense of second-degree criminal usury. The New York Court of Appeals reversed the conviction, holding that the defendant was entitled to particulars regarding the “scheme or business” allegation to adequately prepare his defense, particularly given the significant difference between defending against a single usurious transaction and a broader charge of loansharking.

    Facts

    The defendant was indicted on one count of criminal usury in the first degree. The indictment stemmed from a loan made to Frank Starace. First-degree criminal usury requires proof that the actor’s conduct was part of a scheme or business of making or collecting usurious loans. The defendant moved for particulars of the “scheme or business” allegation in the indictment.

    Procedural History

    The trial court denied the defendant’s motion for particulars. The jury was instructed on the lesser included offense of second-degree criminal usury after the prosecution failed to prove the first-degree charge. The Appellate Division affirmed the conviction. The New York Court of Appeals reversed the order of the Appellate Division and dismissed the indictment, without prejudice to the People seeking leave to resubmit a charge of criminal usury in the second degree.

    Issue(s)

    Whether a defendant charged with first-degree criminal usury, based on an alleged “scheme or business” of making usurious loans, is entitled to particulars regarding the “scheme or business” allegation to adequately prepare a defense.

    Holding

    Yes, because the defendant needs to know what he would be called upon to defend against. The court reasoned that defending against a single usurious transaction is significantly different from defending against the broader charge of loansharking, making particulars necessary for a fair trial.

    Court’s Reasoning

    The Court of Appeals held that the defendant was entitled to particulars regarding the “scheme or business” allegation in the indictment. The court reasoned that even if the indictment sufficiently particularized the one loan made to Frank Starace, the defendant was entitled to particulars as to the “scheme or business” allegation to know what he would be called upon to defend against. The court emphasized the significant difference between defending a single usurious transaction and defending against the broader charge of loansharking. The court noted the prosecutor’s references to the broader charge, even though it could not be proved, further prejudiced the defendant. The court found the People’s argument that the defendant was not prejudiced because only the second-degree offense was charged to the jury unavailing, stating, “The argument answers itself.” The court also dismissed the People’s argument that the defendant was not entitled to particulars because his motion did not allege that he could not adequately prepare his defense without such information, as this argument was not raised in opposing the application, nor did the motion judge deny the request for particulars on that ground. The court cited People v. Iannone, 45 N.Y.2d 589, in support of the defendant’s right to particulars in such a case. The court stated that, in a case such as this, the defendant needs to know what the government is claiming regarding the larger scheme, not just the specific instance for which he is charged. Without this information, the defendant cannot properly prepare a defense.